BUSINESS IN BRIEF 14/1 Vietnamese fruit exporters enjoy larger market in 2015   2015 marked the point at which Vietnam boosted its fruit shipments to several demanding foreign markets, as heard during a conference held on January 12 to review outcomes and set tasks for local plant quarantine work. Efforts carried out last year to boost quality control and lift export barriers has expanded the market for Vietnamese fruits, said Hoang Trung, deputy head of the Plant Protection Department. In 2015, apart from over 1,200 tonnes of dragon fruit and 10.6 tonnes of mangos exported to Japan, Vietnam shipped more than three tonnes of lychees and 100 tonne of longans to the US. Vietnamese herbs have also reappeared in the EU market. Australia has approved the import of Vietnamese fresh lychees and since then has consumed 28 tonnes of the fruits. New Zealand has sent experts to examine rambutan cultivation areas in Vietnam and licensed the fruit to enter the country. The Republic of Korea, meanwhile, decided to expand growing areas for mango export to outside the local Mekong Delta. In terms of import, Vietnam found 603 batches of foodstuffs containing prohibited substances last year. The country has temporarily halted the import of Indian peanuts and Ukrainian wheat due to continuous quarantine violations. Import specifications have also been issued for 13 fruit products from the Netherlands, Australia, Egypt, and Poland, among others. At the conference, the Plant Protection Department said it will focus on quarantine and administration reform, and work with relevant agencies to help local fruit and vegetables make their way to more countries worldwide. In 2015, the volume of import-export commodities grew 17.7 percent from last year.- Singapore: Sweet potatoes grown in Vietnam are safe Japanese sweet potatoes grown in Vietnam that turn green after boiled are safe to eat, the Agri-Food & Veterunary Authority of Singapore (AVA) clarified on January 12 in response to a widely circulated message that said the root vegetables are toxic. Last week, a Facebook user posted an image of slices of Vietnam’s cooked sweet potatoes which turned green after they were kept in the refrigerator overnight and reheated in the microwave oven. The post also quoted an unnamed doctor as saying that the sweet potatoes were grown in soil contaminated by Agent Orange, and warned others not to visit or buy agricultural products imported from Vietnam. However, the AVA rejected the rumours as it said in a statement that “We would like to assure the public that ‘Agent Orange’ is not known to cause sweet potatoes to turn green”. Sweet potatoes contain flavonoids (a type of anti-oxidant), and water-soluble pigments which may cause colour changes, the agency affirmed, adding that if the cooked sweet potatoes are handled and stored properly, they cannot pose a food safety concern. According to the AVA, food imports, including sweet potatoes, are regularly tested for chemicals and other forms of contamination like heavy metals, pesticides and drug residues. Therefore, any food products that do not meet requirements are not permitted for safe in Singapore, it said. A representative from the Vietnamese Embassy in the country stated that right after receiving the information, the embassy was aware of the seriousness of the issue, and contacted and coordinated with local authorities to clarify and re-correct the groundless information. The Trade Counselor at the embassy also worked with AVA representatives to ask for the agency’s check-up and result announcement. FPT Software revenue jumps 31 percent The Financing and Promoting Technology Corporation (FPT) has reported that the revenue of its company FPT Software reached 181 million USD in 2015, an increase of 31 percent from the previous year. The FPT Software provides developed software services and maintenance as well as Enterprise Resource Planning (ERP) Implementation, converted applications, and embedded systems, in addition to mobile computing, and cloud computing. It also provided services to many specialised fields such as banking and finance, telecommunications, healthcare, manufacturing, automotive industry, and energy. Despite the fact that the IT industry has fierce competition, the largest software exporter in Vietnam still has seen significant growth as FPT Software's revenue in 2014 stood at 138 million USD. It was 100 million USD in 2013. The target of FPT Software in 2016 is to reach 10,000 employees and revenue of 200 million USD, according to Hoang Nam Tien, chairman of FPT Software. World Bank to help Vietnam develop trade information portal The World Bank will help the General Department of Customs develop the Vietnam Trade Information Portal under a programme to support Vietnam in implementing the World Trade Organisation’s Trade Facilitation Agreement (TFA). A declaration to this effect was signed between the WB and the General Department of Customs in Hanoi on January 12, under which the WB will also help establish a National Committee on Trade Facilitation, making it easier for Vietnam to fulfill TFA’s terms based on assessment of ministries and agencies’ readiness for complying with commitments. The objective of the portal, which is due to be launched in the next eight months, is to make all regulatory trade-related information useful to Vietnamese exporters and importers easily and readily available in a single integrated website, provide transparency and consistency of trade procedures, and in doing so, increase the compliance level and reduce the cost of doing business at border gates. Earlier on April 16, 2015, the Government Office issued a document on the Prime Minister’s conclusion regarding administrative reform in the customs sector, under which the National Steering Committee on ASEAN and National One-Stop Shop Mechanisms, is expected to play the role of the National Committee on Trade Facilitation. Sapporo Beer to scale up operations in Vietnam Sapporo Holdings Ltd President Tsutomu Kamijo unveiled that the oldest beer brand in Japan wants to expand operations in Vietnam. He anticipated the company’s beer sales in Vietnam might overtake the figure for Japan by 2020. In September 2015, Sapporo acquired all stakeholdings from its Vietnamese partner - to gain complete control over the Sapporo Beer Vietnam Co. Ltd. Kamijo said the company has no further plans for merger and acquisitions, as its target is to consolidate positions in North America and Southeast Asia. Manufacturers show optimistic business prospects for 2016 Enterprises operating in the processing and manufacturing sectors are optimistic about growth in export orders for 2016, Cong Thuong ( Commerce and Industry) newspaper reported on January 11. According to a recent report from the General Statistic Office under the Ministry of Planning and Investment (MOPI) on business trends within the processing and manufacturing industries; over 80 percent of the enterprises evaluated in the first quarter of 2016 will be stable or even better off than 2015. Meanwhile, only 17.7 percent of those forecast that 2016 will be a tougher year than last year. As many as 91.6 percent of enterprises anticipate a higher production volume for 2016, compared with 2015. While 66.7 percent of them predict more stable production costs for the coming year. The office said this major trend clearly shows Vietnam ’s business climate has been improved significantly. In 2015, Vietnam had over 94,750 newly established enterprises with a total registered capital of 601.5 trillion VND (27.3 billion USD) , up 26.6 percent in the number, and 39.1 percent in capital, respectively, compared to 2014. New businesses generated nearly 1.5 million jobs for workers, a year-on-year increase of 34.9 percent. In the same year, the number of enterprises who resumed operation was 21,500, a climb of 39.5 percent compared to the year before, while the number of dissolved businesses was 9,467 revised down 0.4 percent against 2014. The ministry asserted the Enterprises and Investment Laws, which came into effect from July 1, 2015, have shown positive impact on enterprises’ activities. Vietnam-China business forum takes place in Hanoi Representatives from over 20 Chinese enterprises joined their Vietnamese counterparts at a business forum, which was organised by the Vietnam Chamber of Commerce and Industry (VCCI) in Hanoi on January 12. The event offered a good oppertunity to Chinese firms to seek investment and business opportunities, and set up ties with Vietnamese distributors. Deputy Head of the VCCI’s International Relations Division, Pham Quang Thinh, reported that China was Vietnam’s largest trade partner over the last decade. The country remains a leading importer of various goods from Vietnam, such as computers and components, natural rubber, coal and rice, he said. According to Thinh, the ASEAN-China free trade area officially took effect from the end of 2015, with the trade tariff of 7,000 commodities now cut to zero. Zhang Shuai, who led the Chinese business delegation to the event, shared that Chinese enterprises are very interested in the Vietnamese market, which boasts a crowd of consumers, with a stable and favourable business climate. These advantages, along with the geographic proximity of the two states, are expected to enhance connections between the two countries’ enterprises, he said. Trade between the two countries recorded a strong boost in recent years, hitting nearly 60.5 billion USD in 2015, up 14 percent against the previous year. Vietnam’s export turnover to China in the period reached 15.5 billion USD, 14.6 percent higher than that of 2014. Vietnam mainly ships computers, electronics, fibre, vegetables, and cassava to China, while importing machines, cameras, textiles, steel and fertiliser from China. Vietnam’s stock market outperforms peers in 2015 Vietnam’s stock market outperformed a number of developed global markets in terms of foreign investment last year, according to Finance Minister Dinh Tien Dung. Overseas investment in the market rose by 6.1 percent, while Indonesia and Thailand saw drops of approximately 15 percent, followed by India and Malaysia (5 percent), the UK (2.3 percent), the US (2.23 percent) and Australia (2.1 percent). The capitalization of the country’s stock market totalled 58.8 billion USD, equal to 34.5 percent of its Gross Domestic Product (GDP), an increase of 17 percent from 2014. Vietnam attracted 299 trillion VND (13.3 billion USD) in capital through the market. The securities market stayed stable in 2015, but remained vulnerable to fluctuations on the global market, especially foreign currencies, Dung stated. He outlined several measures the Ministry of Finance will undertake this year to direct the market towards sustainable development and stability. The Government issued Decree 60/2015/ND-CP last June to expand foreign ownership ratios in an attempt to entice more indirect investment from overseas. Dung said his ministry will continue to support foreign investors by offering streamlined procedures and online registration services. It also aims to diversify capital flows by luring more investment and voluntary pension funds. The ministry will accelerate the stock market’s restructuring and tighten inspections to enhance transparency, effectiveness and stability. Businesses will also be supported to make the most of free trade agreements (FTAs) and tackle the challenges these FTAs pose, he added. Minister Dung noted that while Vietnam completed 96 percent of its plan on State-owned enterprises (SOEs) restructuring for 2011-2015 last year, the number of shares sold by many SOEs was much lower than targeted. He suggested that promotion conferences could be organised overseas to provide more detailed information on IPOs and Vietnam’s policies for foreign investors and funds. Vietnam draws high-quality FDI projects Selecting high-quality foreign direct investment (FDI) projects is essential to economic growth, Minister of Planning and Investment Bui Quang Vinh has said. FDI has been generating jobs for millions of workers, he said, citing as an example Samsung Electronics Vietnam Thai Nguyen (SEVT) which employs over 200,000 workers. According to the Ministry of Planning and Investment’s Foreign Investment Agency, FDI businesses play a crucial role in the local economy as they create jobs for nearly 3 million workers and make up over 20 percent of the country’s total investment capital. FDI firms active in the northern province of Bac Ninh, Ho Chi Minh City and Binh Duong province are significant contributors to domestic GDP. Statistics from the Foreign Investment Agency show that Vietnam drew more than 22.7 billion USD in newly registered and additional capital in 2015, up 12.5 percent against 2014. Foreign businesses are pumping investment into 19 sectors, especially industrial processing and manufacturing, which attracted 955 newly-registered investment projects and 517 with additional capital worth a combined 15.23 billion USD last year, accounting for 66.9 percent of the total registered investment. Sixty-two nations and territories are running investment projects in Vietnam. The Republic of Korea leads with 702 newly-registered projects and 269 with additional capital totaling 6.72 billion USD, making up 29.6 percent of the total investment capital in Vietnam. Malaysia and Japan are in second and third with 2.47 billion USD and 1.84 billion USD, accounting for 10.9 percent and 8.1 percent of the total investment capital in Vietnam. The foreign investment sector also recorded 115.1 billion USD in exports (including crude oil) last year, an annual increase of 13.8 percent, making up 70.9 percent of Vietnam’s total export turnover. Experts said Vietnam has favourable conditions to become a strategic investment destination for both multi-national groups and small and medium-sized enterprises as the country is a partner of 55 global economies in free trade agreements, with over 90 percent of tariff lines having been cut to zero percent. Head of the Foreign Investment Agency Do Nhat Hoang revealed that there will be more preferential policies for businesses, particularly regarding corporate income tax, import tax and land lease costs. The Ministry of Planning and Investment will continue to call on foreign companies to invest in high-quality projects while embracing links between FDI businesses and domestic partners, he noted.- Demand surges for Tet goods Big cities and provinces in the country have completed stockpiling of goods reserves keeping in mind the increase in demand in the coming Tet (Lunar New Year) holiday. The Ministry of Industry and Trade forecast that the demand for goods in the Tet holiday would increase by 15 per cent to 20 per cent over the previous years. This was the reason that the ministry had asked departments of industry and trade to have plans in place for ensuring supply of goods for the festival, in which price stabilisation should be given priority. The Ha Noi's Department of Industry and Trade said the total amount of essential goods for the holiday was estimated at VND21.6 trillion (more than US$1 billion). Enterprises producing confectionery, beer, soft drinks and milk in the city have stored around VND6.7 trillion ($312 million) worth of items. The trade village produces goods for Tet such as agricultural food processing, confectionery, textiles, and tea, apart from vermicelli and tapioca, and has total value of goods in reserve of over VND2 trillion ($93 million). Commercial centres and supermarkets had a reservation for essential goods worth VND2.7 trillion ($126 million) . In addition, businesses would stockpile and sell essential goods at 1,164 stores, organising 12 Vietnamese goods fairs and nine Vietnamese goods weeks in the outskirts and processing zones in the capital. HCM City would have several new specialities from localities with stable and reasonable prices for the holiday. Supply of goods would come from three sources including firms participating in market price stabilisation programmes (30 per cent to 40 per cent of market shares), three wholesale markets for fruits, vegetables and seafood (60 per cent to 70 per cent) and other businesses (10 per cent to 20 per cent). The total goods value in the city reserved for Tet was VND16.2 trillion ($754 million), increasing VND462 billion in comparison with the previous festival. The city would have 9,025 price stabilisation points, increasing 238 points from the beginning of the year. The amount of goods at the three wholesale markets has been between 14,000 tonnes and 15,000 tonnes a day, increasing 80 per cent from the normal days. The central Da Nang City has also prepared plans for price stabilisation while ensuring the demand for essential goods. The total goods reserved value was up to VND192 billion ($8.93 million) for cooking oil, canned foods, confectionery, and VND12 billion for rice. In the Mekong Delta City of Can Tho, goods available for sale are worth an estimated VND2.5 trillion ($116.3 million) . The city's demand for goods in the year-end month was estimated at 10 per cent to 15 per cent higher than previous months. A representative from the Department of Industry and Trade in the southern Binh Duong Province said most businesses in the locality planned to reserve goods, which was 20 per cent higher than previous years. The ministry established six working groups in charge of uncovering smuggling and trade fraud cases, and monitoring food hygiene, particularly much-consumed goods such as alcohol, cigarettes and other beverage. It would conduct special checks on imported goods such as alcohol, beverages and cigarettes to prevent entry of counterfeit and smuggled goods. It also asked the departments to enhance check-ups on food hygiene and safety and fluctuation. The officials from various localities have promulgated several directives asking businesses to ensure goods supply before and after Tet holiday. SMEs need support to benefit from free trade pacts Domestic small and medium sized enterprises (SMEs) need close co-operation from public offices in getting information about regulations of free trade agreements (FTAs) for getting more benefits from the agreements. This was suggested by experts at an Asia-Pacific Economic Cooperation (APEC) public-private dialogue. According to the APEC Secretariat, the APEC region had 148 FTAs by the end of 2014, 20 times higher than 1990. The FTAs have had immense impact on trade results in the APEC region with a growth in trade value from US$2.3 trillion in 2000 to $6.3 trillion in 2014. The FTAs would usher in numerous benefits for large companies and multinational economic groups and firms because they have the ability to develop efficiently business opportunities that emerge from the FTAs, Nguyen Cam Tu, Deputy Minister of industry and trade, said at the dialogue in Ha Noi last week to determine and remove barriers for SMEs to take advantage of business opportunities arising from the FTAs. However, SMEs cannot avail the advantages from the FTAs, especially in Viet Nam, an APEC member country, according to Tu. Ninety per cent of Vietnamese enterprises are SMEs and tiny companies. They have an important role in the local economy but have faced numerous challenges in the development of production and business, especially in accepting business opportunities from the FTAs. But the FTAs will present SMEs with opportunities to expand their business in the foreign markets and integrate in the global economy. However, Tran Ba Cuong, head of WTO Division under the Ministry of Industry and Trade's Multi-lateral Trade Policy, said that only 30 per cent of Vietnamese SMEs had studied carefully the FTAs that had already been signed and had come into effect, to take advantage of them. "The local SMEs have no clear knowledge about regulations of the FTAs, including tariff, origin and trade barriers," he said. "They also lack market information and analysis." The lack of staff in the SMEs and tiny firms also prevented the firms from studying carefully the FTA regulations, he said. These regulations were very complicated and the firms needed time to understand them and apply them to their businesses. Tran Thi Thanh Tam, deputy director of the Centre of Supports for Small and Medium sized Enterprises, said that since the awareness of firms about FTA regulations was limited they were weak competitively. Therefore, Cuong said the SMEs needed close co-operation between the Government sector and the private sector to solve difficulties, deal with challenges and accept business opportunities from FTAs after the agreements come into effect. The ministries and sectors should further disseminate FTA regulations for the benefit of SMEs and tiny firms, he said. Meanwhile, the firms should study the FTA regulations as soon as possible to prepare specific plans on the incoming time of export activities, he said. For instance, they must clearly understand everything about export goods meeting origin regulations or on enjoying preferential tariff. They must reform production and business to benefit from the FTA regulations on origin, tariff and also overcome trade barriers. One more important issue is the need to directly connect to the Ministry of Industry and Trade to solve their difficulties while doing business under the FTA regulations. Economic expert Vo Tri Thanh said the State should have solutions on developing SMEs to find more important spots in the global value chains in the future. Australian firm desires to develop software industry in Thua Thien-Hue The central province of Thua Thien-Hue will support and create the best possible conditions for Australian WorkWithAnyOne Company to invest in human resource training and the software industry in the province. Vice Chairman of the provincial People’s Committee Phan Ngoc Tho made the commitment at a recent meeting with WorrkWithAnyOne Director Ken Standfield. Mr Standfield said the company wants to cooperate with provincial universities, general education schools and information technology (IT) centres in IT training and software development. Online IT courses will help trainees quickly acquire IT knowledge and be able to create software products and develop initiatives, he added. Mr Tho affirmed that Thua Thien-Hue province is willing to support WorkWithAnyOne in investing in the software industry in the coming time. Slight advantage decides Vinamotor race Vietnam N.A Motor Co., Ltd (N.A Motor) has overtaken TN Development Joint Stock Company (TN) in Vietnam Motors Industry Corporation (Vinamotor)’s second auction to purchase the state’s 97.7% stake. On January 11, the Ministry of Transport (MoT) has conducted an auction to sell 85.6 million state-owned Vinamotor shares, equalling 97.7% of the total stakes, at the initial price of VND14,612 (US$0.64) per share. Both N.A Motor and TN bid aproximately VND1.25 trillion (US$55.8 million) for the whole batch of 85.6 million shares at the price of VND14,600 ($0.64), however, N.A Motor won by offering VND2 million (US$89.2) higher than TN. N.A Motor and TN are the only two bidders meeting the MoT’s requirements to join in the auction. Previously, Vinamotor failed painfully in its IPO in March 2014. It announced the auction of 51 million state-owned shares for an initial price of VND10,000 (US$0.47) per share, however, only 3.1% of the shares were taken up, falling incomparably short of its original expectations, acquiring only VND15.7 billion (US$735,370). Vinamotor’s second share auction was organised in the context of the auto industry’s accelerating development and the approval to sell the entire state-owned stake. The changes made the auction more attractive, despite the higher initial price. Established in 2005, N.A Motor specialises in distributing cars and motorbikes, selling spare parts, vehicle insurance, as well as providing vehicle maintenance and repair. The company is currently expanding its operations to the real estate sector. N.A Motor, with its solid finances, commits to make Vinamotor the country’s leading car manufacturer and distributor. As of June 2015, the company has a total equity of VND1.11 trillion (US$49.1 million). First five-star hotel in My Khe Beach to be inaugurated Grand Tourane Danang Hotel – the first five-star hotel on My Khe Beach in Danang, will officially be operational on February 1. Invested by Datraco trading construction design Ltd Company, the hotel was built on 12,900sq.m at a cost of VND485 billion. It has two convention halls, each with a total seating capacity of 400-600 for one event, restaurants, bars, café, spa, and gyms with latest equipment. Datraco General Director and Management Board President Phan Son Anh said the company has worked with ASIAN GRAND LEGACY, Ltd to propose international standard management solutions in order to develop Grand Tourane into the first five-star hotel on My Khe beach. The hotel will welcome first guests on February 1 with room rates of between US$80-90 per night. The official inauguration ceremony will take place on March 29. Rough seas ahead for Vietnamese seafood exporters Vietnam's seafood industry must improve its competitiveness if it is to reach its US$7-billion export goal this year, a challenge given a 15.5% year-on-year drop in exports last year, according to the Vietnam Association of Seafood Exporters and Processors (VASEP). The year 2016’s goal is a 12.5% reduction against the US$8-billion target of 2015, the VASEP said. The Southeast Asian country last year earned US$6.7 billion from exporting seafood, equal to 84.5% of 2014’s exports, according to the VASEP. The year 2015 was the first time export revenues from the two major seafood items, shrimp and catfish, had dropped, the association said. While shrimp exports fell 25% year on year, from the record of US$$4 billion in 2014 to about US$3 billion in 2015, catfish shipments were also estimated to have experienced a 10% year-on-year decline, it added. Moreover, the decrease was not only in export value, but also in market share across some of the main export markets including the U.S. and the European Union (EU) with a 1-2% fall from 2014. In addition, the rate of returns of Vietnamese seafood shipments also rose in 2015, according to the VASEP. In only the first nine months of 2015, the number of seafood shipments to be returned due to high rates of residues in antibiotics and micronutrients, along with other types of contamination, was equivalent to the rate recorded in 2014. Among them, 27 consignments were rejected by Japan, and similar moves taken by authorities in the EU, the US and other overseas markets, the association said, citing a report of the Ministry of Agriculture and Rural Development. In the US, shipments of Vietnamese fish and shrimp detected with high antibiotic residues increased six times compared with 2014. Food safety authorities in Australia, the EU, and South Korea also issued warnings about applying stronger measures like checking all products imported from Vietnam, and said they would consider stopping the import of Vietnamese seafood if the number of violations in antibiotic residues and other kinds of contaminants continued rising. During 2016, the VASEP estimates that Vietnam's shrimp will still be affected by widespread price cuts from its competitors, and that exports of seafood to the U.S., the biggest market for the Southeast Asian country, will face more hurdles. According to a preliminary ruling of the U.S. Department of Commerce on anti-dumping duty during the latest review, the POR11, for the period of August 2013 to July 2014, tax rates for two Vietnamese leading catfish exporters, Hung Vuong and Thuan An, were at US$0.36 per kg and US$0.84 per kg respectively, the VASEP said. Meanwhile the common rates for the remaining 16 countries were at US$0.6 per kg. Although this is only a preliminary ruling and was lower than the rates regulated by the POR10, it was still very difficult for Vietnamese enterprises to sell their catfish to the U.S. at competitive prices considering the newly-imposed anti-dumping duties, according to the VASEP. In addition, Vietnamese catfish exporters are facing new regulations in exporting products to the U.S. from September 2017. Allowed 18 months for a transitional period after the U.S. Farm Bill takes effect, Vietnamese seafood entering the US will be required to follow the regulations of the Food Safety and Inspection Service (FSIS) under the U.S. Department of Agriculture, instead of being overseen by the U.S. Food and Drug Administration (FDA) as was the case previously. The food safety standard regulated by the FSIS is very different from what was applied by the FDA, which will take Vietnam many years of effort to fully adapt to, the VASEP said. The FSIS requires a review of 100% of imported products starting September 2017, instead of inspection on only one percent of the imports as the FDA did previously. What is more, the FSIS has strict regulations at each production stage, like the sources of breed and feed, checking for antibiotic and veterinary drug residues, transportation, and processing at factories, which all hikes the cost of production in Vietnam. It also stated that foreign aquaculture techniques must be as good as those applied in the U.S. before a firm is allowed to export its products to the U.S. market, which means Vietnamese companies must register and prove that their seafood farming culture is similar to that in the North American country, the VASEP said. The FSIS usually takes at least eight years to consider recognizing similar standards for meat and poultry exporters to the US., and no Southeast Asian country has ever achieved similar certification in the meat and poultry sector, the association said. The U.S. Farm Bill was proposed in 2008, in the context of catfish shipments from Vietnam, China and some other countries already accounting for over 75% of sales to the US., which at that stage had pushed American catfish farmers and processors to the brink of bankruptcy, the VASEP added. Government demands monetary flexibility for economic growth The State Bank of Viet Nam (SBV) is to actively implement flexible monetary policies to help the country control inflation, maintain macro-economic stability and accelerate economic growth this year. The government has tasked the SBV to ensure this following a resolution on socio-economic development plans in 2016, in tight conjunction with ministries and relevant agencies. It emphasised that exchange rate policies must stabilise the foreign currency market, and interest rate operations are to foster lending growth and quality. That required strict control of loans allocated in high-risk areas, such as real estate and investment projects breaking even in a long period of time. It asked the central bank to intensify foreign currency and gold trading and continue to improve the national foreign reserve, besides stimulating non-cash payment. Also, the SBV must closely observe developments in international monetary and financial markets to take suitable action against negative impacts that global economic integration may have on the domestic market. Comprehensive reorganisation of credit institutions is to be continued to enhance their financial capacity and operational efficiency, and consolidate their security. Drastic intervention of the government is needed for thorough handling of fragile institutions. Spontaneous mergers and acquisitions, reduction in the cross ownership, and divestments from non-core lines of business are encouraged for credit institutions. The capacity and resources of the national bad loan settling firm, Viet Nam Asset Management Company, is to be improved to help maintain the overall ratio of bad debts below 3 per cent of the total outstanding loans in the economy. SBV Governor Nguyen Van Binh said on the sidelines of an online government conference recently late last month that the economic growth target of 6.7 per cent this year might push inflation out of control. Last year's inflation rate was mainly due to external factors, especially the falling global prices of oil and other staples. This year's inflation would be around 3 per cent if those factors were excluded. Binh asked ministries, sectors and localities to keep a firm grasp on prices, particularly essential goods, while affirming that the central bank would strive to maintain overall interest rates or cut down average medium to long-term lending rates by 0.3 per cent to 0.5 per cent. Credit growth of less than 20 per cent would match the targeted economic growth rate, he added. On January 4, the central bank began setting the official reference exchange rate every day, instead of maintaining a fixed rate for a longer period of time. It believed that the new mechanism would enable it to ensure its management objectives, while letting the rate move flexibly as per global monetary fluctuations. In its resolution, the government also said that monetary policies must be properly combined with fiscal and other macro-economic policies for quality and sustained development. Five-year bond yield seen rising Yields of Government bonds with terms five years or longer will likely rise this year, VPBank Securities said in a report yesterday. The research said the G-bond market experienced its most successful trading in the fourth quarter of 2015 with bonds sold at auction at between 70 and 90 per cent of. The Government mobilized VND131 trillion ($5.8 billion) in the quarter, thanks to the 3-year bond supply and newly launched products from the State Treasury in December such as long-term bonds and zero-coupon bonds that sold at 100 per cent. The research said the sale of G-bonds was still growing from 2014 with a total issuance of VND243 trillion ($10.8 billion), up 2.8 per cent in G-bonds and government-guaranteed bonds Despite good demand in the last quarter, the State Treasury, the largest G-bond issuer in Viet Nam, failed to meet their target for the year. The State Treasury issued VND196 trillion ($8.7 billion), completing 51.2 per cent of the year's target and a reduction of 7 per cent from 2014. Of the bonds, 3-year and 5-year bonds accounted for the highest proportion of sales. At the same time, most of the bond yields rose higher than they were in 2014. By the end of the year, yields on 5-year bond in the primary market was 18 basis points higher reaching 6.58 per cent per year while the yield of the 10-year bond reached 6.95 per cent per year, up 76 basic points and yield of 3-year bonds rose 55 basic points to 5.74 per cent per year. As the only exception, yield of 15-year bonds fell 15 basic points to 7.65 per cent per year. VPBank Security thought that the yield increased due to low demand for bonds and the fluctuations in the exchange rate and it believed that yields will continue to rise, estimating that 5-year (and more) bond yields could reach between 7 and 7.3 per cent this year. The increase will be due to the large amount of the bonds offered to support the state budget. The National Assembly only approved the issuing of 3-year bonds, the most attractive bonds, to not exceed 30 per cent of the total issuance volume, so the last 70 per cent of the bonds will have a term of 5 years and more. Most investors focus on 3-year bonds because of higher liquidity and lower risk, while the supply of longer term bonds was larger but demand for them was lower. Meanwhile, downward pressure on the dong, the fear of a devaluation of the Chinese yuan and possibly more interest rate hikes from the US Federal Reserve System may make investors set aside a portion of their capital to hedge instead of buying local bonds. Furthermore, local credit growth was expected to be as high as 18 or 20 per cent while the banking system will continue restructuring activities in 2016. Bad debts success not enough Despite bad debts dropping well below the 3 per-cent threshold, local banks are still struggling with debt recovery. As of September 30, 2015, a large number of local banks managed to sell a huge chunk of their bad debts volume to the Vietnam Asset Management Company (VAMC) or drive them below the 3 per-cent threshold themselves, in accordance with the State Bank of Vietnam’s requirements.   BIDV, for instance, was recorded to have sold the largest amount of bad debts to VAMC last year, with over VND11 trillion ($504.5 million), surpassing its own target by 25 per cent. Likewise, Maritime Bank sold almost VND6 trillion ($275.2 million) worth of bad debts to the agency, overperforming its plan to sell VND4.6 trillion ($211 million) in the first place. Although bad debts have been brought down to below 3 per cent, banks still find it hard to cope with debt recovery or controlling the arrival of new bad debts at the same time as expanding credit flow. Banks, as such, have no choice but to boost provisions for bad debts, as well as handle them and take initiative to collect their debts, apart from selling to VAMC. Vietcombank was possibly leading in terms of bad debts handling in the country when it was able to self-manage over VND8.4 trillion ($385.3 million) worth of bad debts in the first eight months of the year, 1.5 fold higher than its set target. BIDV, likewise, settled over VND4.2 trillion ($192.6 million) of its bad debts, completing 65 per cent of the entire annual target. Military Bank and VPBank were also productive in their bad debts handling programme, as the former took good care of over VND3 trillion ($137.6 million) and the latter of some VND2 trillion ($91.7 million) of bad debts. In order to clean up bad debts and ensure normal bank activities, banks ought to creep up their risk provisions, which in turn will eat up a growing portion of their profit. Eximbank, for example, made a risk provision of VND1.17 trillion ($53.7 million) in the first 11 months of the year, resulting in a shrunken pre-tax profit of VND552 billion ($25.3 million), accounting for only 52 per cent of the bank’s annual target. According to Eximbank’s leader, their shareholders will not receive dividends, as the post risk provisions profit was too little. However, once the bank manages to recover its debts in the future, provisions will be added to its profits and dividends will rise accordingly. Other banks also strived to deal with their bad debts. SHB, at the end of August 2015, handled up to VND500 billion ($22.9 million) of bad debts, twice as much as its initial plan. ABBank, meanwhile, recovered VND398 billion ($18.2 million) of bad debts in the same time, and by the end of September the figure added up to VND656 billion ($30.1 million). Other commercial banks, like SeABank or KienlongBank, however, only managed 14 and 23 per cent, respectively, of their bad debts target set for the year. Foreign banks’ path to dominate domestic market Not satisfied with serving only foreign-invested entreprises operating in Vietnam, foreign banks are working to expand amongst domestic customers. As of now, foreign banks do not have as large a network in Vietnam as domestic banks do. In order to increase coverage in Vietnam, many foreign banks want to establish 100 per cent foreign-owned subsidiaries. Citibank, for example, is waiting for a letter of approval in principle from the State Bank of Vietnam. If granted, this is going to be the seventh 100 per cent foreign-owned bank in the country, besides HSBC, Standard Chartered, Hong Leong, ANZ, Shinhan, and Public Bank Berhad. Singaporean bank UOB has also requested permission to upgrade from a branch to a 100 per cent foreign-owned bank. Huang Nam Chou, general director of Taiwanese bank E.SUN, the first branch of which opened in Dongnai province last September, said the Vietnamese market had much potential for financial and banking services and said that E.SUN was going to open a 100 per cent foreign-owned subsidiary in the country. “The Vietnamese economy has been growing by an average 6 per cent per year in the past five years. Vietnam also signed many free trade agreements,” he explained, adding that Vietnam was important in E.SUN’s Asian strategy and in Vietnam they targeted not only Taiwanese companies but also Vietnamese and other foreign companies. He also said the bank was going to make profit in its first year in Vietnam, and that E.SUN was going to expand to individual Vietnamese customers as well, not just companies. The reason was that following Vietnam’s rising income per capita, the demand for credit to buy houses and cars was going to rise too. Foreign banks are attracting individual customers by offering attractive consumer credit packages and mortgages for homes, as well as mobile and internet banking services. With the modern technology already implemented in other countries, they are becoming more and more appealing to domestic customers. Experts in the field said domestic banks should invest in technology to remain competitive. Le Thanh Trung, deputy director of HDBank, said domestic banks should learn governance from foreign banks. Vietnam currently has about 100 branches and representative offices of foreign banks from South Korea, Japan, Singapore, and Thailand, countries that pour a large amount of foreign direct investment into Vietnam. Booyoung Vina presses on amidst uncertainty Nine years after starting construction works, South Korean-backed international residential complex Booyoung Vina shows little progress. What does the future hold for this $171 million complex? Booyoung Vina apartment complex, to be built on six square land plots covering a total 4.3 hectares (ha) in the heart of Mo Lao new urban area in Hanoi’s Ha Dong district, was licensed to Booyoung Vietnam Company Limited in 2006. The completion of the six 30-storey apartment buildings was slated for completion in 2010. Lying along the main road to vibrant Mo Lao new urban area, Booyoung Vina project’s site would make a favourable residential area. Booyoung Vina’s residential compounds are, however, left unfinished, while other nearby residential projects, such as the TSQ residential complex, Ho Guom Plaza, or Mulberry Lane, are basically completed. The construction of the residential complex kicked off in February 2007, but ran into difficulties soon after. Booyoung Vina Limited’s inconsistent investment plan was allegedly attributable to customers’ insecurity. Accordingly, from 2007 to 2013 the company had submitted numerous documents requesting changing the project developer as well as the apartment building’s housing structure. Particularly, in 2011 Booyoung Vina recommended Booyoung Housing Company Limited, a subsidiary of Booyoung Company Limited, as the project’s new developer. Then in mid 2013, the company continued proposing the Ministry of Construction (MoC) and Hanoi People’s Committee for an amendment to the housing structure of apartment buildings. In a feedback to Booyoung Vina’s proposal, the MoC asked the investor to submit additional documents, such as negotiation minutes where it was stipulated that the new investor would inherit all benefits and obligations relevant to parent company Booyoung Company Limited, among other conditions. One condition was that “the change of investment right must not generate profits”, effectively countering the plan. In respect to the project’s progress, in July 2011 Booyoung Vina Limited re-started the project but efforts came short again. More than four years later, in September 2015 the developer resumed construction on two land plots at the project site. Construction efforts have just been noted at one of the sites where the foundation work was nearly completed and concrete pillars for the prospective 30-storey building were spotted. Progress was nearly imperceptible at other land plots. Considering the project’s ill-reputed past and uncertain future, the million dollar question is whether there are customers brave enough to sign purchase contracts at Booyoung Vina international apartment project? VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR